C2D vs i5 vs i7? The Core 2 is an old architecture, now, and is being replaced by the Core i architecture. Core i is a super-smart new architecture that allows you to get faster processors with less power consumption and heat and so forth. Basically, i5's and i7's are supercharged turbocharged V8's with blowers and nitrous. This doesn't mean the Core 2 Duos aren't still respectable power houses.
Cache: 3 - 6mb and what does it matter: This would be almost irrelevant to an end-user.
2.66Hz or smaller? What is the benefit? 1hz means the CPU has one cycle (group of calculations) per second. Hertz is a measure of frequency. So the greater the frequency, the more RPM of the engine

(2.66ghz= 2,660,000,000 cycles per second) More is not necessarily faster. For instance, a 2ghz Core i5 will smoke a 2ghz Core 2 Duo.
Graphics: please help on this one. Graphics cards power the graphics on your display. The more power, the more complex the graphics can be. This is most commonly taken advantage of by external monitors, scientific simulations that involve complex animations, and video games.
RAM: 4 or 8gb? RAM allows you to run more applications simultaneously without having to stop to read the hard drive so often. It's like opening more lanes on a highway; you can have more cars traveling simultaneously. The thing is, there is such thing as
too many lanes if you have too few cars. Depending on what you use you may just want 4gb of ram.
HD: 320 or 500gb? And why This is the storage capacity of the computer. The more capacity, the more videos and pictures and documents and applications he can store.
Just so you know, in the future, you can upgrade the Hard Drive, RAM or optical drive if you choose.